CITY OF OWATONNA, MINNESOTA - City of North Mankato FINA… · Notes to Schedule of Expenditures of...

CITY OF NORTH MANKATO NORTH MANKATO, MINNESOTA

COMPREHENSIVE ANNUAL

FINANCIAL REPORT

FOR THE YEAR ENDED DECEMBER 31, 2016

PREPARED BY:

FINANCE DEPARTMENT

KEVIN MCCANN Finance Director

Member GFOA of U.S. and Canada

Published June 27, 2017

THIS PAGE IS LEFT BLANK

INTENTIONALLY

CITY OF NORTH MANKATO, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT

TABLE OF CONTENTS FOR THE YEAR ENDED DECEMBER 31, 2016

Page No. INTRODUCTORY SECTION Letter of Transmittal 7 Principal City Officials 12 Organizational Chart 13 GFOA Certificate of Achievement for Excellence in Financial Reporting 14 FINANCIAL SECTION Independent Auditor’s Report 17 Management’s Discussion and Analysis 21 Basic Financial Statements Government-wide Financial Statements Statement of Net Position 35 Statement of Activities 36 Fund Financial Statements Governmental Funds Balance Sheet 42 Reconciliation of the Balance Sheet to the Statement of Net Position 45 Statement of Revenues, Expenditures and Changes in Fund Balances 46 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities 48 Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - General Fund 49 Proprietary Funds Statements of Net Position 50 Statements of Revenues, Expenses and Changes in Net Position 52 Statements of Cash Flows 54 Fiduciary Funds Statement of Fiduciary Assets and Liabilities 58 Notes to the Financial Statements 59 Required Supplementary Information Schedule of Employer’s Share of Public Employees Retirement Association Net Pension Liability -

General Employees Retirement Fund 101 Schedule of Employer’s Public Employees Retirement Association Contributions - General Employees Retirement Fund 101 Schedule of Employer’s Share of Public Employees Retirement Association Net Pension Liability - Public Employees Police and Fire Fund 102 Schedule of Employer’s Public Employees Retirement Association Contributions - Public Employees Police and Fire Fund 102 Schedule of Changes in the Fire Relief Association’s Net Pension Liability (Asset) and Related Ratios 103 Schedule of Employer’s Fire Relief Association Contributions 104 Schedule of Funding Progress for the Retiree Health Plan 104

Combining and Individual Fund Financial Statements and Schedules Nonmajor Governmental Funds Combining Balance Sheet 107 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 108 Nonmajor Special Revenue Funds Combining Balance Sheet 114 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 118 Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Community Development Block Grant Fund 122 Local Option Sales Tax Fund 123 Nonmajor Capital Projects Funds Combining Balance Sheet 127 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 129

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INTENTIONALLY

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CITY OF NORTH MANKATO, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT

TABLE OF CONTENTS - CONTINUED FOR THE YEAR ENDED DECEMBER 31, 2016

Page No. Combining and Individual Fund Financial Statements and Schedules - Continued

Nonmajor Proprietary Funds Statements of Net Position 130 Statements of Revenues, Expenses and Changes in Net Position 132 Statements of Cash Flows 134

General Fund Comparative Balance Sheets 141

Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 142 Debt Service Funds

Combining Balance Sheet 150 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances 154

Agency Funds Combining Statement of Fiduciary Assets and Liabilities 162

Statement of Changes in Assets and Liabilities 164 Summary Financial Report

Revenue and Expenditures for General Operations - Governmental Funds 165

STATISTICAL SECTION (UNAUDITED) TABLE Financial Trends

Net Position by Component 1 170 Changes in Net Position 2 172 Governmental Activities Tax Revenues by Source 3 177 Fund Balances of Governmental Funds - Last Ten Fiscal Years 4 178 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years 5 180 General Governmental Tax Revenues by Source - Last Ten Fiscal Years 6 183

Revenue Capacity Tax Capacity and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years 7 184 Property Tax Rates Direct and Overlapping Governments - Last Ten Fiscal Years 8 187 Principal Property Taxpayers 9 188 Property Tax Levies and Collections - Last Ten Fiscal Years 10 191

Debt Capacity Ratios of Outstanding Debt by Type - Last Ten Fiscal Years 11 192 Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years 12 194 Computation of Direct and Overlapping Debt 13 197 Legal Debt Margin Information - Last Ten Fiscal Years 14 198 Pledged-Revenue Coverage-Water, Sewer and Sanitation Bonds - Last Ten Fiscal Years 15 200

Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years 16 201

Principal Employers - Current Year and Nine Years Ago 17 203 Operating Information

Full-Time Equivalent City Government Employees by Function - Last Ten Fiscal Years 18 204 Operating Indicators by Function - Last Ten Fiscal Years 19 206 Capital Asset Statistics by Function - Last Ten Fiscal Years 20 208

SINGLE AUDIT AND OTHER REQUIRED REPORTS Independent Auditor’s Report on Minnesota Legal Compliance 213 Independent Auditor’s Report on Internal Control over Financial Reporting and on

Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 214 Independent Auditor’s Report on Compliance for Each Major Federal Program and Report

on Internal Control Over Compliance Required by the Uniform Guidance 216 Schedule of Expenditures of Federal Awards 218 Notes to Schedule of Expenditures of Federal Awards 219 Schedule of Findings, Responses and Questioned Costs 220 Corrective Action Plans 223 Schedule of Prior Year Findings 224

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INTRODUCTORY SECTION



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INTENTIONALLY

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June 27, 2017

Honorable Mayor Members of the City Council City of North Mankato North Mankato, Minnesota 56003 State law requires that all general purpose local governments publish within six months of the close of each fiscal year a complete set of financial statements presented in conformance with Generally Accepted Accounting Principles (GAAP) and audited in accordance with Generally Accepted Auditing Standards (GAAS) by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the City of North Mankato (the City) for the fiscal year ended December 31, 2016. The report consists of management’s representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material aspects. The City’s financial statements have been audited by Abdo, Eick & Meyers, LLP, a licensed certified public accounting firm. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended December 31, 2016 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosure in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City’s financial statements for the fiscal year ended December 31, 2016 are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD & A). This letter of transmittal is designed to complement MD & A and should be read in conjunction with it. The City’s MD & A can be found immediately following the report of the independent auditors.

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Profile of the Government The City of North Mankato is a city of the third class and is located in Nicollet County. Nestled along the bluffs at the bend of the Minnesota River in south-central Minnesota, it is approximately 80 miles southwest of the Minneapolis / Saint Paul metropolitan area. Access is provided via U.S. Highways 14 and 169, State Highways 22, 60, 66 and 68, and Interstate I-35 and I-90 are located within 40 and 50 miles of the City, respectively. There are 28 truck lines servicing the City with six truck terminals in the City. The Dakota Minnesota and Eastern Railroad Co. and Union Pacific Railroad provide daily freight rail service to the City. The City is also serviced by the Mankato Regional Airport which can accommodate charter, commercial freight and jet planes with a 6,600-foot paved, lighted runway. The City currently occupies a land area of four square miles and has a population of 13,808. The City is empowered to levy a property tax on real property located within its corporate limits. The City was incorporated in 1898 and has been a Statutory City since 1974. The City operates under the Optional Plan A form of government. Policy making and legislative authority is vested in a governing council consisting of the Mayor and four Council Members. The Mayor and City Council are responsible, among other things, for passing ordinances, adopting the budget, appointing committees, and hiring the City Administrator. The City Administrator is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the government, and for appointing the heads of various departments. The Mayor and Council are elected on a non-partisan basis. Council Members serve four-year staggered terms. The Mayor is elected to serve a two-year term.

The 2010 U.S. Census designated the Mankato/North Mankato region as an urbanized area (metropolitan statistical area-MSA). Designation as an MSA is beneficial, positively having an impact on quality of life and the economy, including increased funding for transportation and economic development. The City provides a full range of services, including police and fire protection, the construction and maintenance of highways, streets and other infrastructure, and recreational services, along with water, sewer, storm water and sanitation utility services. North Mankato features a number of City parks for recreational activities among which is Caswell Park, one of the premier softball complexes in the nation. This facility has a substantial pedigree of hosting community, state, regional and national tournaments and features the Miracle Field for special needs athletes. The annual budget serves as the foundation for the City’s financial planning and control. The City Administrator presents the proposed budget to the Council for review prior to September 30. The Council will hold a public hearing on the proposed budget and adopt a final budget by no later than December 31, the close of the City’s fiscal year. The appropriated budget is prepared by fund, function, and departmental program. Budget to actual comparisons are provided for each individual governmental fund for which an appropriated annual budget has been adopted.

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Factors Affecting Financial Condition The information presented in the financial statements is best understood when it is considered from the broader perspective of the specific environment within which the City operates. Local Economy The City currently enjoys a favorable economic environment and local indicators point to continued growth. The unemployment rate is 3.1 percent which represents an increase from the previous year rate of 2.7 percent, mostly due to closing retailers. The Mankato/North Mankato area is a regional center for retail trade, agriculture, medical care, manufacturing and education. The area is home to Minnesota State University-Mankato, South Central College, Bethany College and Rasmussen College. The Mankato-North Mankato Metropolitan Statistical Area (MSA) has a total labor force of 57,992 which is projected to grow in several important areas. The 15-24 year old group (the “talent pipeline”) is expected to grow by 30% from 2015 to 2030. While the nation has growing concerns around the supply of “experienced peak performers” (45-64 year olds) - only 5.4% growth over the next 25 years - our MSA is projected to have 15.5% growth over the same time period. The City continues to experience residential growth with permits issued in 2016 for 23 new residential housing units at a total value of $6,125,130. The market value of all new residential, commercial and industrial permits in fiscal year 2016 was $17,507,669. The residential development continues to take advantage of existing inventory in subdivisions and much of the industrial growth comes from firms locating to the North Port Industrial Park owned by the North Mankato Port Authority, the economic development agency of the City. Long-Term Financial Planning The preparation of the annual budget includes a Five-Year Operating Forecasts, a Five-Year Capital Improvement Plan, a yearly equipment replacement schedule and long-term projections of debt service requirements. In 2013, the City Council elected to conduct a debt study to analyze existing debt obligations with estimated revenues. This was prompted by declining revenue from projects funded with special assessments resulting in interfund loans to the Debt Service funds from both the General fund, Water Utility fund and Sewer Utility fund in the amount of $2,772,624 at the end of fiscal year 2013. Based on a repayment schedule adopted by the City Council these loans continue to be repaid each year and at the end of fiscal year 2016 the outstanding balance was $1,833,864. Complete payment of this interfund loan will be made in 2023. Refunding of the 2015B bonds including escrow proceeds effected the combined debt service fund balance by moving it from a negative position in 2014 to a positive position of approximately $1,500,000 by the end of fiscal year 2015. Following escrow payments in 2017, the combined funds will likely return to a negative fund balance that will resolve in time with the repayment of the interfund loans mentioned in the above paragraph.

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Major Developments

• Sale of 12 acres to North Central Utility (semi-trailer service, parts, sales) building in North Port Industrial Park.

• Development of a 40,000 square foot North Central Utility building.

• $1,200,000 remodel of the Taylor Corporation building. 2016 Five-Year Capital Improvement Plan Projects Well No. 9 Construction - This project constructed of a municipal well finished in Mt. Simon formation, furnishing and installing a turbine pump and construction of a well house at a cost of $1,675,000. The project will be financed using a Public Facilities Authority Note and debt service payments on the note will come from the Water fund. Lookout Drive Reconstruction and Roundabout - Completed reconstruction from Commerce Drive to Howard Drive and construction of two roundabouts located at the eastbound and westbound Highway 14 ramp intersections with Lookout Drive at a cost of $5,760,000. Project financing will came from Federal, State and Municipal State Aid funds of approximately $3,480,000, $590,000 and $1,690,000, respectively. West Carlson Drive Extension - New street and utility construction began on West Carlson Drive from County State Aid Highway (CSAH) 41 to approximately 850-feet west of CSAH 41. Estimated project costs are $1,047,000. The project will be financed using general obligation bonds and paid from special assessments on property to be annexed into the City, property tax levy to pay for the deferred assessment portion on property to be annexed into the City and enterprise funds. 2016 Roe Crest Dr. Project – This project consists of complete reconstruction of water, sewer, and storm water utilities, curb, gutter, and street surfaces along Roe Crest Dr. from Lee Blvd. to Marie Lane at a cost of $1,335,000. The project will be financed using general obligation bonds and paid from special assessments, enterprise funds, and the property tax levy. Municipal Building Improvement Project – This project consists of the redesign of the Municipal Building entrance and parking lot by removing the old handicap ramp and parking lot to raise the ground up six feet to construct a gently sloped sidewalk and parking lot that meet ADA requirements with improved aesthetics and functionality. Project includes new front entry sidewalk, parking lot, hardscaping and landscaping, and lighting for a total project cost of $337,000. Funding for the project came from Community Development Block Grant allocations and the Capital Facilities and Equipment Replacement Fund.

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Equipment The Five-Year Capital Improvement Plan calls for the replacement of $3.2 million dollars of equipment to be funded with cash contributions from the City’s General fund, Capital Facilities and Equipment Replacement fund, and utility funds. Awards and Acknowledgements The Government Finance Officers Association (GFOA) awarded the Certificate of Achievement for Excellence in Financial Reporting to the City of North Mankato for its comprehensive annual financial report (CAFR) for the fiscal year ended December 31, 2015. This was the twenty-ninth year that the City has received the prestigious award. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently organized CAFR. This report satisfied both GAAP and applicable requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. Respectfully submitted,

John Harrenstein Kevin McCann City Administrator Finance Director

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CITY OF NORTH MANKATO, MINNESOTA PRINCIPAL CITY OFFICIALS

FOR THE YEAR ENDED DECEMBER 31, 2016 MAYOR: Mark Dehen COUNCIL MEMBERS: Diane Norland Kim Spears Billy Steiner Bob Freyberg CITY ADMINISTRATOR: John Harrenstein FINANCE DIRECTOR: Kevin McCann CITY CLERK: April Van Genderen POLICE CHIEF: Chris Boyer FIRE CHIEF: Rich Inman PUBLIC WORKS DIRECTOR: Brad Swanson WATER SUPERINTENDENT: Duane Rader BUILDING OFFICIAL: Dave Knudson LIBRARY DIRECTOR: Lucy Lowry CITY PLANNER: Mike Fischer CITY ATTORNEY: Kennedy and Kennedy CONSULTING ENGINEER: Bolton & Menk AUDITOR: Abdo, Eick & Meyers, LLP BOND COUNSEL: Kennedy & Graven, Chtd. FINANCIAL ADVISOR: Northland Securities, Inc. PORT AUTHORITY BOND COUNSEL: Briggs & Morgan and Kennedy & Graven, Chtd.

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FINANCIAL SECTION



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INTENTIONALLY

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INDEPENDENT AUDITOR’S REPORT Honorable Mayor and City Council City of North Mankato Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of North Mankato, Minnesota (the City), as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City as of December 31, 2016, and the respective changes in financial position and, where applicable, cash flows thereof and the budgetary comparison for the General fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.

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INTENTIONALLY

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Other Matters Report on Summarized Comparative Information We have previously audited the City's 2015 financial statements, and we expressed unmodified opinions on the respective financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information in our report dated June 20, 2016. In our opinion, the summarized comparative information presented herein for the respective proprietary fund financial statements as of and for the year ended December 31, 2015, is consistent, in all material respects, with the audited financial statements from which it has been derived. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis starting on page 21 and the Schedules of Employer’s Share of the Net Pension Liability, the Schedule of Changes in Net Pension Liability (Asset) and Related Ratios, the Schedules of Employer’s Contributions and the Schedule of Funding Progress for the Retiree Health Plan starting on page 101 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, combining and individual fund financial statements and schedules and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. Also, the accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the financial statements. The combining and individual fund financial statements and schedules and the Schedule of Expenditures of Federal Awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules and the Schedule of Expenditures of Federal Awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 27, 2017, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

ABDO, EICK & MEYERS, LLP Mankato, Minnesota June 27, 2017

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INTENTIONALLY

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Management’s Discussion and Analysis

As management of the City of North Mankato (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2016. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found starting on page 7 of this report.

Financial Highlights

• The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the closeof the most recent fiscal year by $52,766,363 (net position). Of this amount, a balance of $885,083 represents unrestrictednet position which may be used to meet the City’s ongoing obligations to citizens and creditors.

• The City’s total net position decreased by $768,990 as compared to an increase of $6,821,916 in the previous year.

• Capital grants and contributions decreased by $4,745,754 from 2015, mostly due to street construction State aid of$1,940,320 and street construction Federal aid of $3,037,182 in the prior year.

• Public safety expenses increased $786,274 mainly due to activity related to GASB 68.• Housing and economic development expenses increased $1,345,507 mainly due to a loss recorded on a sale of lots.• Business-type activities net position decreased $105 from 2015. This was mostly due to increases in expenses in the

water, sewer, storm water and solid waste functions from the prior year.

• As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of$7,626,187 an increase of $1,438,336 in comparison with the prior year. Major factors contributing to this increase relates toGeneral fund balance increasing and revenues and other financing sources exceeding debt service expenditures in the DebtService fund. However, the 2015 Construction fund deficit continued during the year was caused by the State advancingMunicipal State Aid Funds for Streets that were received in cash by the City in 2015 and 2016 but will not be recognized asrevenue until available in future years. At the end of the current fiscal year, unassigned fund balance was a deficit of$698,940 .

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Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplemental information in addition to the basic financial statements themselves. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of combining and individual fund financial statements and schedules that further explains and supports the information in the financial statements. Figure 1 shows how the required parts of this annual report are arranged and relate to one another. In addition to these required elements, we have included a section with combining and individual fund financial statements and schedules that provide details about nonmajor governmental funds, which are added together and presented in single columns in the basic financial statements.

Figure 1 Required Components of the

City’s Annual Financial Report

Management's Discussion and

Analysis

Basic Financial Statements

Required Supplementary

Information

Government-wide Financial

Statements

FundFinancial

Statements

Notes to theFinancial

Statements

Summary Detail

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Figure 2 summarizes the major features of the City’s financial statements, including the portion of the City government they cover and the types of information they contain. The remainder of this overview section of management’s discussion and analysis explains the structure and contents of each of the statements.

Figure 2 Major Features of the Government-wide and Fund Financial Statements

Fund Financial Statements

Government-wide Statements

Governmental Funds Proprietary Funds

Scope Entire City government (except fiduciary funds) and the City’s component units

The activities of the City that are not proprietary or fiduciary, such as police, fire and parks

Activities the City operates similar to private businesses, such as the water and sewer system

Required financial statements

• Statement of Net Position

• Statement of Activities

• Balance Sheet • Statement of Revenues,

Expenditures, and Changes in Fund Balances

• Statement of Net Position • Statement of Revenues,

Expenses and Changes in Net Position

• Statement of Cash Flows Accounting basis and measurement focus

Accrual accounting and economic resources focus

Modified accrual accounting and current financial resources focus

Accrual accounting and economic resources focus

Type of asset/liability information

All assets and liabilities, both financial and capital, and short-term and long-term

Only assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets included

All assets and liabilities, both financial and capital, and short-term and long-term

Type of deferred outflows/inflows of resources information

All deferred outflows/inflows of resources, regardless of when cash is received or paid.

Only deferred outflows of resources expected to be used up and deferred inflows of resources that come due during the year or soon thereafter; no capital assets included

All deferred outflows/inflows of resources, regardless of when cash is received or paid

Type of in flow/out flow information

All revenues and expenses during year, regardless of when cash is received or paid

Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter

All revenues and expenses during the year, regardless of when cash is received or paid

Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City’s assets and deferred outflows of resources and liabilities and deferred inflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works, culture and recreation and miscellaneous. The business-type activities of the City include water, wastewater, sanitation, storm water and solid waste.

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The government-wide financial statements include not only the City itself (known as the primary government), but also a legally separate port authority for which the City is financially accountable. The port authority, although legally separate, functions for all practical purposes as a department of the City, and therefore has been included as an integral part of the primary government. The government-wide financial statements can be found starting on page 35 or this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local government, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact by the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 42 individual governmental funds, which includes 19 Debt Service funds that are considered one fund for financial reporting. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General fund, the Debt Service fund, the 2014 Construction fund, the 2015 Construction fund and the 2016 Construction fund, all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its General fund. A budgetary comparison statement has been provided for the General fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found starting on page 42 of this report. Proprietary funds. The City maintains one type of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its water, sewer, sanitary collection, storm water and solid waste operations. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water, sewer, sanitary collection, storm water and solid waste operations, all of which are considered to be major funds of the City. The basic proprietary fund financial statements can be found starting on page 50 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the City. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found starting on page 58 of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found starting on page 59 of this report. Required supplementary information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City of North Mankato’s share of net pension liabilities (assets) for defined benefits plans, schedules of contributions, and progress in funding its obligation to provide pension and other postemployment benefits to its employees. Required supplementary information can be found starting on page 101 of this report. Other information. The combining statements referred to earlier in connection with the nonmajor governmental funds are presented immediately following the notes to the financial statements. Combining and individual fund financial statement and schedules can be found starting page 107 of this report.

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Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City, assets exceeded liabilities by $52,766,363 at the close of the most recent fiscal year. By far, the largest portion of the City’s net position (82.4 percent) reflects its investment in capital assets (e.g., land, buildings, machinery and equipment), less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

City of North Mankato’s Summary of Net Position

Increase Increase2016 2015 (Decrease) 2016 2015 (Decrease)

Current and other assets 16,600,392$ 17,300,117$ (699,725)$ 5,751,419$ 6,850,164$ (1,098,745)$ Net capital assets 44,586,514 45,598,161 (1,011,647) 26,675,252 27,071,878 (396,626)

Total assets 61,186,906 62,898,278 (1,711,372) 32,426,671 33,922,042 (1,495,371)

Deferred outflows of resources 4,091,831 635,498 3,456,333 367,670 80,049 287,621

Long-term liabilities outstanding 29,545,746 26,216,869 3,328,877 11,716,824 12,578,424 (861,600)

Other liabilities 737,765 1,817,032 (1,079,267) 363,974 719,688 (355,714)

Total liabilities 30,283,511 28,033,901 2,249,610 12,080,798 13,298,112 (1,217,314)

Deferred inflows of resources 2,764,517 2,500,281 264,236 177,889 168,220 9,669

Net positionNet investment in

capital assets 24,879,816 25,459,305 (579,489) 18,591,065 20,951,087 (2,360,022) Restricted 8,410,399 8,277,733 132,666 - - - Unrestricted (1,059,506) (737,444) (322,062) 1,944,589 (415,328) 2,359,917

Total net position 32,230,709$ 32,999,594$ (768,885)$ 20,535,654$ 20,535,759$ (105)$

Governmental Activities Business-type Activities

An additional portion of the City’s net position (15.9 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position (1.7 percent) may be used to meet the City’s ongoing obligations to citizens and creditors.

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Governmental activities. Governmental activities decreased the City’s net position by $768,885, accounting for 100.0 percent of the total decrease. Key elements of this change are as follows:

City of North Mankato’s Changes in Net Position

Increase Increase 2016 2015 (Decrease) 2016 2015 (Decrease)

RevenuesProgram revenues

Charges for services 815,005$ 751,240$ 63,765$ 5,349,287$ 5,325,728$ 23,559$ Operating grants and

contributions 504,154 522,566 (18,412) 4,044 - 4,044 Capital grants and

contributions 1,077,024 5,822,778 (4,745,754) 23,482 19,588 3,894 General revenues

Property taxes/tax increments 6,111,924 5,909,504 202,420 - - -

Other taxes 1,065,158 1,078,732 (13,574) 1,380 1,367 13 Grants and contributions not

restricted to specific programs 1,626,188 1,633,639 (7,451) - - - Unrestricted investment earnings 20,668 5,060 15,608 19,628 2,110 17,518 Other 160,660 230,285 (69,625) - - - Gain on sale of capital assets 359,159 163,426 195,733 - - -

Total revenues 11,739,940 16,117,230 (4,377,290) 5,397,821 5,348,793 49,028

ExpensesGeneral government 1,320,840 827,191 493,649 - - - Public safety 2,840,353 2,054,079 786,274 - - - Public works 3,387,740 2,874,244 513,496 - - - Culture and recreation 2,039,352 1,737,105 302,247 - - - Housing and economic

development 2,348,526 955,956 1,392,570 - - - Mass transit and other 288,787 386,098 (97,311) - - - Interest on long-term debt 686,477 948,022 (261,545) - - - Water - - - 1,677,867 1,637,985 39,882 Wastewater - - - 1,946,051 1,864,280 81,771 Sanitation - - - 373,509 558,817 (185,308) Storm water - - - 303,974 209,573 94,401 Solid waste - - - 693,275 590,757 102,518

Total expenses 12,912,075 9,782,695 3,129,380 4,994,676 4,861,412 133,264

Increase (decrease) in net position before transfers (1,172,135) 6,334,535 (7,506,670) 403,145 487,381 (84,236)

Transfers 403,250 158,727 244,523 (403,250) (158,727) (244,523)

Change in net position (768,885) 6,493,262 (7,262,147) (105) 328,654 (328,759) Net position - January 1 32,999,594 26,506,332 6,493,262 20,535,759 20,207,105 328,654

Net position - December 31 32,230,709$ 32,999,594$ (768,885)$ 20,535,654$ 20,535,759$ (105)$


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The following graphs depict various governmental activities and show the revenue and expenses directly related to those activities.

Expenses and Program Revenues - Governmental Activities

$-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

Generalgovernment

Public safety Public works Culture andrecreation

Housing andeconomic

development

Mass transitand other

Interest on long-term debt

Expenses Program Revenues

Revenues by Source - Governmental Activities

Charges for services6.9%

Operating grants and contributions

4.3%

Capital grants and contributions

9.2%

Unrestricted grants and contributions

13.9%

Property taxes/tax increments

52.0%

Other taxes9.1%

Unrestricted investment earnings

0.2%

Other 4.4%

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Business-type activities. Business-type activities decreased the City’s net position by $105. Key elements of this change are as follows:

• Total operating income was $660,892, a decrease of $146,562 from the prior year, mainly due to an increase in expenses across all funds.

• Total nonoperating expenses exceeded nonoperating revenues by $281,229, mostly consisting of bond interest and issuance costs.

• Transfers out totaled $433,250 for 2016.

Expenses and Program Revenues - Business-type Activities

$-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

Water Wastewater Sanitation Storm water Solid waste

Expenses Program Revenues

Revenues by Source - Business-type Activities

Charges for services99.6%

Capital grants and contributions

0.4%

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Financial Analysis of the City’s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. The General fund is the chief operating fund of the City. At the end of the current year total fund balance of the General fund was $4,064,351 most of which was unassigned. As a measure of the General fund’s liquidity, it may be useful to compare unassigned fund balance to total fund expenditures. Unassigned fund balance represents 35.2 percent of total General fund expenditures, while total fund balance represents 55.0 percent of that same amount. The General fund balance increased by $288,145 during the current year. Major factors of the increase in the fund balance of the City’s General fund was due to revenues exceeding budget by $39,036, including special assessments, intergovernmental, charges for services and miscellaneous revenues were over budget by $22,088, $56,796, $75,779 and $46,578, respectively. The Debt Service fund has a total fund balance of $2,158,831. There was an increase of $640,676 in the current year, partially attributable to transfers in of $683,728. The 2014 Construction fund has a total fund balance of $175,174. This balance is mainly due to unspent bond proceeds. There was no activity in this fund during the year. The 2015 Construction fund has a total fund balance deficit of $1,482,589. This deficit balance is due to insufficient aid and bond proceeds to cover construction costs. This deficit was caused by the State advancing Municipal State Aid Funds for Streets that were received in cash by the City in 2015 and 2016 but will not be recognized as revenue until available in future years. The 2016 Construction fund has a total fund balance of $258,050. This balance is mainly due to unspent bond proceeds. Proprietary funds. The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the Water, Wastewater, Sanitation, Storm Water and Solid Waste funds at the end of the year totaled $1,944,589. The total decrease in net position in the current year for these funds totaled $105. General Fund Budgetary Highlights The City’s General fund budget was not amended during the year. Revenues were over budget by $39,036 and expenditures came in under budget by $94,049. Other financing sources (uses) had a positive variance of $27,137. The net result was an increase to the General fund balance of $288,145.

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Capital Asset and Debt Administration Capital assets. The City’s investment in capital assets for its governmental and business type activities as of December 31, 2016 amounts to $71,261,766 (net of accumulated depreciation). This investment in capital assets includes land, buildings and system improvements, machinery and equipment, park facilities, roads, highways, and bridges. The total decrease in the City’s investment in capital assets for the current fiscal year was 1.9 percent. Major capital asset events during the current fiscal year included the following:

• Land disposals totaling $1,720,408 mostly related to Port Authority parcels. • Equipment and vehicle purchases of $1,141,960; disposals of $1,505,550 including, but not limited to, a new fire truck,

new squad cars, a backhoe loader, an oil distributor, a street sweeper and various park equipment. • Improvements totaling $2,444,094 were added to construction in progress for the 14/41 Interchange project, CSAH 41

Trail, Spring Lake Park hockey rink and warming project, Well No. 9 construction, Lookout Drive reconstruction, Roe Crest Drive reconstruction, Main Lift Station No. 1 and West Carlson Drive project. The Well No. 6, Well No. 9 and Main Lift Station No. 1 construction projects were completed in 2016.

Additional information on the City’s capital assets can be found in Note 3C starting on page 72 of this report.

City of North Mankato’s Capital Assets (net of depreciation)


Land 3,974,292$ 5,694,700$ (1,720,408)$ 490,616$ 490,616$ -$ Buildings and improvements 28,934,708 30,836,627 (1,901,919) 25,303,635 23,620,150 1,683,485 Machinery and equipment 1,928,697 1,374,169 554,528 881,001 973,102 (92,101) Construction in progress 9,748,817 7,692,665 2,056,152 - 1,988,010 (1,988,010)

Total 44,586,514$ 45,598,161$ (1,011,647)$ 26,675,252$ 27,071,878$ (396,626)$


Long-term debt. At the end of the current fiscal year, the City had total bonded debt outstanding of $31,722,981. Of this amount, $5,735,000 comprises debt backed by the full faith and credit of the City and $1,180,000 is tax increment bonds and $12,735,000 is special assessment debt for which the City is liable in the event of default by the property owners subject to the assessment. The remainder of the City’s bonded debt represents bonds secured solely by specified revenue sources (i.e., revenue bonds) in the amount of $12,072,981.

City of North Mankato’s Outstanding Debt


General obligation bonds 5,735,000$ 5,785,000$ (50,000)$ -$ -$ -$ G.O. tax increment bonds 1,180,000 1,245,000 (65,000) - - - G.O. improvement bonds 11,885,000 11,825,000 60,000 850,000 935,000 (85,000) General obligation

revenue bonds 2,580,000 2,935,000 (355,000) 9,492,981 10,606,031 (1,113,050) Contracts 516,000 628,000 (112,000) - - -

Total 21,896,000$ 22,418,000$ (522,000)$ 10,342,981$ 11,541,031$ (1,198,050)$

Business-type ActivitiesGovernmental Activities

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The City’s total debt decreased by $1,720,050 (5.1 percent) during the current fiscal year, consisting of new debt issuances of $2,765,959 and retirement of long-term debt of $4,486,009. The City maintained an “AA” rating from Standard and Poor’s for their 2016 issues. Minnesota statutes limit the amount of net general obligation debt a City may issue to 3 percent of the market value of taxable property within the City. Net debt is debt payable solely from ad valorem taxes. The current debt limitation for the City is $21,653,529, which is significantly in excess of the City’s outstanding general obligation debt. Additional information on the City’s long-term debt can be found in Note 3E starting on page 76 of this report. Economic Factors and Next Year’s Budgets and Rates

• The 2016 unemployment rate for the City was 2.4 percent, which is a decrease from a rate of 3.2 percent a year ago. This compares favorably to the State’s average unemployment rate of 4.0 percent and the national average rate of 4.7 percent.

• Inflationary trends in the region compare favorably to national indices.

• Tax capacity valuation increased in 2016 for taxes payable in 2016 by $406,307 or 3.9 percent. Market value of property has increased an average of .9 percent per year for the past 10 years.

All of these factors were considered in preparing the City’s budget for the 2017 fiscal year. Requests for Information This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the City’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, City of North Mankato, P.O. Box 2055, North Mankato, 56003-2055.

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INTENTIONALLY

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GOVERNMENT-WIDE FINANCIAL STATEMENTS



-33-


INTENTIONALLY

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CITY OF NORTH MANKATO, MINNESOTA

STATEMENT OF NET POSITION

DECEMBER 31, 2016

Governmental Business-type

Activities Activities Total

ASSETS

Cash and temporary investments 7,842,339$ 1,958,328$ 9,800,667$

Restricted assets - cash with fiscal agent 1,849,888 2,206,280 4,056,168

Receivables

Taxes 126,148 - 126,148

Accounts 93,962 418,289 512,251

Interest 20,338 - 20,338

Notes, mortgages and leases 1,019,196 - 1,019,196

Special assessments 3,896,903 70,206 3,967,109

Intergovernmental 2,267,556 30,930 2,298,486

Internal balances (1,005,200) 1,005,200 -

Inventories - 60,494 60,494

Prepaid items 37,232 1,692 38,924

Pension asset 452,030 - 452,030

Capital assets

Nondepreciable assets 13,723,109 490,616 14,213,725

Depreciable assets net of accumulated depreciation 30,863,405 26,184,636 57,048,041

TOTAL ASSETS 61,186,906 32,426,671 93,613,577

DEFERRED OUTFLOWS OF RESOURCES

Deferred pension resources 4,091,831 367,670 4,459,501

LIABILITIES

Accounts payable 207,849 173,722 381,571

Contracts payable 128,634 - 128,634

Due to other governments 97,690 71,099 168,789

Accrued interest payable 184,086 81,124 265,210

Accrued wages payable 119,506 38,029 157,535

Noncurrent liabilities

Due within one year 4,509,976 978,035 5,488,011

Due in more than one year 25,035,770 10,738,789 35,774,559

TOTAL LIABILITIES 30,283,511 12,080,798 42,364,309

DEFERRED INFLOWS OF RESOURCES

Deferred pension resources 855,655 177,889 1,033,544

Deferred intergovernmental revenue 1,908,862 - 1,908,862

TOTAL DEFERRED INFLOWS OF RESOURCES 2,764,517 177,889 2,942,406

NET POSITION

Net investment in capital assets 24,879,816 18,591,065 43,470,881

Restricted for

Debt service 5,827,182 - 5,827,182

Library programs 50,000 - 50,000

Park development 5,866 - 5,866

Park improvements 140,734 - 140,734

Economic development 2,318,139 - 2,318,139

Tax increment financing 68,478 - 68,478

Unrestricted (1,059,506) 1,944,589 885,083

TOTAL NET POSITION 32,230,709$ 20,535,654$ 52,766,363$

The notes to the financial statements are an integral part of this statement.

-35-


STATEMENT OF ACTIVITIES


Operating Capital

Charges for Grants and Grants and

Functions/Programs Expenses Services Contributions Contributions

Governmental activities

General government 1,320,840$ 140,856$ -$ 135,646$

Public safety 2,840,353 334,361 219,608 25,000

Public works 3,387,740 6,735 173,078 915,878

Culture and recreation 2,039,352 204,071 78,176 500

Housing and economic development 2,348,526 128,982 33,292 -

Mass transit and other 288,787 - - -

Interest on long-term debt 686,477 - - -

Total governmental activities 12,912,075 815,005 504,154 1,077,024

Business-type activities

Water 1,677,867 1,772,186 2,107 5,767

Sewer 1,946,051 2,097,858 1,362 17,715

Sanitation 373,509 466,183 116 -

Storm water 303,974 276,474 263 -

Solid waste 693,275 736,586 196 -

Total business-type activities 4,994,676 5,349,287 4,044 23,482

Totals 17,906,751$ 6,164,292$ 508,198$ 1,100,506$

General revenues

Property taxes, levied for general purposes

Property taxes, levied for debt service

Tax increments

Sales taxes

Hotel/motel taxes

Gambling taxes

Franchise taxes

Grants and contributions not restricted to specific programs

Unrestricted investment earnings

Other revenues

Gain on sale of assets

Transfers

Total general revenues and transfers

Change in net position

Net position, January 1

Net position, December 31

Program Revenues


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Governmental Business-type

Activities Activities Total

(1,044,338)$ (1,044,338)$

(2,261,384) (2,261,384)

(2,292,049) (2,292,049)

(1,756,605) (1,756,605)

(2,186,252) (2,186,252)

(288,787) (288,787)

(686,477) (686,477)

(10,515,892) (10,515,892)

102,193$ 102,193

170,884 170,884

92,790 92,790

(27,237) (27,237)

43,507 43,507

382,137 382,137

(10,515,892) 382,137 (10,133,755)

4,281,047 - 4,281,047

1,541,476 - 1,541,476

289,401 - 289,401

582,290 1,380 583,670

54,156 - 54,156

26,306 - 26,306

402,406 - 402,406

1,626,188 - 1,626,188

20,668 19,628 40,296

160,660 - 160,660

359,159 - 359,159

403,250 (403,250) -

9,747,007 (382,242) 9,364,765

(768,885) (105) (768,990)

32,999,594 20,535,759 53,535,353

32,230,709$ 20,535,654$ 52,766,363$

Net (Expense) Revenue and

Changes in Net Position


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INTENTIONALLY

-38-

FUND FINANCIAL STATEMENTS



-39-


INTENTIONALLY

-40-


INTENTIONALLY

-41-


BALANCE SHEET

GOVERNMENTAL FUNDS

DECEMBER 31, 2016

Capital Projects

Debt 2014

General Service Construction

ASSETS

Cash and temporary investments 2,768,529$ 2,122,502$ 175,174$

Restricted assets - cash with fiscal agent - 1,849,888 -

Receivables

Taxes 126,148 - -

Accounts 92,378 - -

Interest - 20,338 -

Notes, mortgages and leases - - -

Special assessments 25,639 3,871,264 -

Intergovernmental 77,630 2,036,240 -

Due from other funds 1,446,921 - -

Prepaid items 37,232 - -

TOTAL ASSETS 4,574,477$ 9,900,232$ 175,174$

LIABILITIES

Accounts payable 141,287$ -$ -$

Contracts payable - - -

Due to other funds - 1,833,964 -

Due to other governments 97,546 - -

Accrued interest payable - 1,173 -

Accrued wages payable 119,506 - -

TOTAL LIABILITIES 358,339 1,835,137 -

DEFERRED INFLOWS OF RESOURCES

Unavailable revenue

Taxes 126,148 - -


Intergovernmental - 2,035,000 -

TOTAL DEFERRED INFLOWS OF RESOURCES 151,787 5,906,264 -

FUND BALANCES

Nonspendable 1,475,134 - -

Restricted - 2,158,831 175,174

Assigned - - -

Unassigned 2,589,217 - -

TOTAL FUND BALANCES 4,064,351 2,158,831 175,174

TOTAL LIABILITIES, DEFERRED INFLOWS OF

RESOURCES AND FUND BALANCES 4,574,477$ 9,900,232$ 175,174$


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Other

2015 2016 Governmental

Construction Construction Funds Totals

519,391$ 340,864$ 1,915,879$ 7,842,339$

- - - 1,849,888

- - - 126,148

- - 1,584 93,962

- - - 20,338

- - 1,018,786 1,018,786

- - - 3,896,903

1,252 - 152,434 2,267,556

- - - 1,446,921

- - - 37,232

520,643$ 340,864$ 3,088,683$ 18,600,073$

1,890$ 48,665$ 16,007$ 207,849$

92,480 34,149 2,005 128,634

- - 618,157 2,452,121

- - 144 97,690

- - - 1,173

- - - 119,506

94,370 82,814 636,313 3,006,973

- - - 126,148

- - - 3,896,903

1,908,862 - - 3,943,862

1,908,862 - - 7,966,913

- - - 1,475,134

- 258,050 2,583,217 5,175,272

- - 276,841 276,841

(1,482,589) - (407,688) 698,940

(1,482,589) 258,050 2,452,370 7,626,187

520,643$ 340,864$ 3,088,683$ 18,600,073$

Capital Projects


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INTENTIONALLY

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RECONCILIATION OF THE BALANCE SHEET

TO THE STATEMENT OF NET POSITION

GOVERNMENTAL FUNDS

DECEMBER 31, 2016

Amounts reported for governmental activities in the statement

of net position are different because

Total fund balances - governmental funds 7,626,187$

Net capital assets used in governmental activities are not financial

resources and therefore are not reported as assets in the funds. 44,586,514

Long term assets from pensions reported in governmental activities are not financial

resources and therefore are not reported as assets in the funds. 452,030

Long-term liabilities, including bonds payable, are not due and payable in the

current period and therefore are not reported as liabilities in the funds.

Long-term liabilities at year-end consist of

Severance payable (590,209)

Other postemployment benefits obligation (286,318)

Pension liability (6,474,297)

Bonds payable (21,380,000)

Contracts payable (516,000)

Unamortized bond discounts, net of amortization 5,468

Unamortized bond premiums, net of amortization (304,390)

Long-term assets are not available to pay current-period expenditures and, therefore,

are unavailable in the funds.

Delinquent property taxes receivable 126,148

Special assessments receivable 3,896,903

Intergovernmental receivable 2,035,000

Interest receivable 410

Governmental funds do not report long-term amounts related to pensions.

Deferred outflows of pension resources 4,091,831

Deferred inflows of pension resources (855,655)

Governmental funds do not report a liability for accrued interest until

due and payable. (182,913)

Total net position - governmental activities 32,230,709$


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STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDS


Capital Projects

Debt 2014

General Service Construction

REVENUES

Taxes 4,664,566$ 1,541,476$ -$


Licenses and permits 360,412 - -

Intergovernmental 2,056,525 273,425 -

Charges for services 242,214 - -

Fines and forfeits 31,247 - -

Investment earnings 3,978 16,579 -

Miscellaneous 171,591 - -

TOTAL REVENUES 7,557,518 2,886,485 -

EXPENDITURES

Current

General government 752,144 - -

Public safety 2,183,726 - -

Public works 1,675,017 - -

Culture and recreation 1,647,680 - -

Housing and economic development 500,854 - -

Mass transit and other 288,787 - -

Capital outlay

General government - - -

Public safety - - -

Public works 223,130 - -

Culture and recreation 91,356 - -

Debt service

Principal - 2,210,000 -

Interest and other costs - 689,537 -

Bond issuance costs - - -

TOTAL EXPENDITURES 7,362,694 2,899,537 -

EXCESS (DEFICIENCY) OF REVENUES

OVER (UNDER) EXPENDITURES 194,824 (13,052) -

OTHER FINANCING SOURCES (USES)

Sale of capital assets - - -

Transfers in 279,350 683,728 -

Debt issued - - -

Premium on bonds issued - - -

Transfers out (186,029) (30,000) -

TOTAL OTHER FINANCING SOURCES (USES) 93,321 653,728 -

NET CHANGE IN FUND BALANCES 288,145 640,676 -

FUND BALANCES, JANUARY 1 3,776,206 1,518,155 175,174

FUND BALANCES, DECEMBER 31 4,064,351$ 2,158,831$ 175,174$


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Other

2015 2016 Governmental

Construction Construction Funds Totals

-$ -$ 945,947$ 7,151,989$

- - - 1,081,990

- - - 360,412

372,909 538,569 33,292 3,274,720

- - - 242,214

- - - 31,247

- - 111 20,668

- - 216,199 387,790

372,909 538,569 1,195,549 12,551,030

- - - 752,144

- - - 2,183,726

9,379 - - 1,684,396

- - 34,785 1,682,465

- - 357,945 858,799

- - - 288,787

- 348,730 39,065 387,795

- - 605,948 605,948

267,988 1,239,737 363,085 2,093,940

- - 5,545 96,901

- - 112,000 2,322,000

- - 18,000 707,537

- 37,015 - 37,015

277,367 1,625,482 1,536,373 13,701,453

95,542 (1,086,913) (340,824) (1,150,423)

- - 352,874 352,874

- - 347,529 1,310,607

- 1,335,000 465,000 1,800,000

- 32,635 - 32,635

(100,000) - (591,328) (907,357)

(100,000) 1,367,635 574,075 2,588,759

(4,458) 280,722 233,251 1,438,336

(1,478,131) (22,672) 2,219,119 6,187,851

(1,482,589)$ 258,050$ 2,452,370$ 7,626,187$

Capital Projects


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RECONCILIATION OF THE STATEMENT OF

REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

TO THE STATEMENT OF ACTIVITIES

GOVERNMENTAL FUNDS


Amounts reported for governmental activities in the statement

of activities are different because

Net change in fund balances - governmental funds 1,438,336$

Governmental funds report capital outlay as expenditures. However, in the statement of

activities the cost of those assets is allocated over the estimated useful lives and reported

as depreciation expense.

Capital outlay 3,203,314

Depreciation expense (2,272,554)

The statement of activities reports losses arising from trade-in of existing capital assets to acquire new capital assets.

Conversely, governmental funds do not report any gain or loss on a trade-in of capital assets. (1,942,407)

The issuance of long-term debt provides current financial resources to governmental funds, while

the repayment of principal of long-term debt consumes the current financial resources of governmental

funds. Neither transaction, however, has any effect on net position. Also, governmental funds report

the effect of premiums, discounts and similar items when debt is first issued, whereas these amounts

are deferred and amortized in the statement of activities.

Principal repayments 2,322,000

Debt issued or incurred (1,800,000)

Discount on bonds issued, net of amortization expense (3,342)

Premium on bonds issued, net of amortization expense 450

Interest on long-term debt in the statement of activities differs from the amount reported in the

governmental fund because interest is recognized as an expenditure in the funds when it is due,

and thus requires the use of current financial resources. In the statement of activities, however,

interest expense is recognized as the interest accrues, regardless of when it is due. 28,332

Long-term pension activity is not reported in governmental funds.

Pension expense (532,249)

Direct aid contributions 17,771

Certain revenues are recognized as soon as they are earned. Under the modified accrual

basis of accounting certain revenues cannot be recognized until they are available

to liquidate liabilities of the current period.

Property taxes 24,879

Special assessments (802,899)

Intergovernmental revenues (410,000)

Some expenses reported in the statement of activities do not require the use of current

financial resources and, therefore, ar

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